Retail Trends

ERS provides information on foodstore sales and sales growth, the share of food sales by retail segment, and industry structure.

Sales and Sales Growth

The Nation's 212,000 traditional foodstores sold $571 billion of retail food and nonfood products in 2011. Grocery stores, including supermarkets, accounted for the largest share of foodstore sales (91.0 percent), followed by convenience stores without gasoline (5.5 percent). Specialized foodstores, including meat and seafood markets, produce markets, retail bakeries, and candy and nut stores, accounted for the remaining 3.4 percent of the total (see Glossary for store type definitions).

Grocery store sales increased in 2010 and 2011, following the 2007-09 recession—a period of economic uncertainty in which traditional grocery retailers experienced negative inflation-adjusted growth. During the past decade, there were many years in which grocery store sales growth (in current dollars) exceeded the rate of inflation. Inflation-adjusted sales growth was small, averaging 0.08 percent per year. The slow and negative inflation-adjusted growth in annual sales at traditional grocery stores was likely due in part to increased competition from nontraditional food retailers—such as warehouse clubs, supercenters, drugstores, and other retailers—as more consumers economized on food spending.

Industry Structure

Sales by the 20 largest food retailers totaled $449.3 billion in 2013, accounting for 63.8 percent of U.S. grocery store sales, an increase from 39.9 percent in 1993. Although shares held by the largest 4, 8, and 20 supermarket and supercenter retailers have decreased slightly since 2008, the longer-term trend shows an increasing concentration of sales among the Nation's largest grocery retailers. One contributing factor to such increases over the past decade has been the steady growth of Wal-Mart Supercenters. Their food and nonfood grocery sales amounted to an estimated $117.4 billion in 2013, making it the largest U.S. retailer of grocery products. In comparison, second-place Kroger—the largest traditional grocery retailer—had sales of $76.7 billion in 2013. Meanwhile, aggregate grocery store sales rose 2.4 percent in 2013, a slightly smaller increase than in 2012 and the fourth consecutive annual increase since a recession-induced decline in 2009.

Supermarkets experienced major consolidation and structural change through mergers, acquisitions, divestitures, and internal growth in the mid-to-late 1990s. These factors produced increasing shares of the largest 4, 8, and 20 grocery retailers during this period. This vigorous consolidation activity slowed throughout the following decade and has risen during the last couple of years. Supermarket mergers and acquisitions were slightly higher in 2013 than in 2012, and the 2013 mergers and acquisitions were at their highest level since 2007. Some highlights for 2013 include the following:

The top four grocery retailers in 2013 were Wal-Mart Stores, Inc., Kroger, Safeway, and Publix Super Markets.

In 2013, the share of grocery sales by the top 4 and top 20 grocery retailers rose for the first time since the recession of 2007-2009, and held steady for the top 8 grocers.

Kroger, the largest traditional supermarket chain, acquired Harris Teeter, a retailer with 212 stores operating in eight states. However, these stores will continue to operate under the Harris Teeter name.

Following divestiture by Supervalu, Albertson’s returns to the top rankings and is currently the sixth largest grocery retailer. Albertson’s agreed to acquire Safeway in the first quarter of 2014, and the sale was confirmed by shareholders in July, 2014. The combined companies would have held third place in these rankings—roughly midway between Kroger and Publix by sales volume—had they operated as a single company in 2013.

Target is now included in these rankings and was the 16th-largest grocer in 2013. Adjusted sales from Target and Wal-Mart Stores, Inc. are added to grocery sales from the Census Bureau because these stores are not classified as supermarkets by the North American Industry Classification System (NAICS). Therefore, grocery sales reported by the Census Bureau are smaller than total sales used to estimate the reported concentration ratios.

Trends and Developments

Nontraditional stores

Since the late 1990s, nontraditional retailers have steadily increased their relative share of food-at-home sales, compared with traditional retailers. Nontraditional stores' share of food-at-home sales increased from 13.7 percent in 2000 to 21.5 percent in 2011 (traditional foodstores and nonstore food sales—such as mail order, home delivery, and direct sales by farms, processors, and wholesalers—account for the remaining shares). Most of the growth in food sales is due to supercenters and warehouse club stores, whose sales more than doubled over the period. More recently, dollar stores—such as Dollar General and Family Dollar—and drugstores—such as Rite Aid, CVS, and Walgreens—have increased sales by expanding retail food offerings.

Traditional foodstores

In response to the sales inroads made by nontraditional retailers, traditional grocers are expanding the number and types of product offerings, designing new store formats, and using innovative instore technologies. Hannaford Supermarkets, a division of Delhaize Group (Belgium), introduced "Guiding Stars," a simplified nutrition label to help consumers make more healthful food choices. According to a recent ERS article, leading supermarket chains are expanding their private labels (store brands) to meet the needs of economizing consumers. Many food retailers such as Safeway, Kroger, and Giant Eagle have added gasoline pumps in their parking lots and other locations. In addition, some supermarkets offer promotional tie-ins to grocery purchases, such as gasoline discounts, in an attempt to increase sales.

With many consumers seeking organic and natural foods, traditional supermarkets have responded by adding such products to their shelves. Kroger, Giant Food, and Shaw's all offer corporate-brand organic or natural products (Naturally Preferred, Nature's Promise, and Wild Harvest). Publix has introduced its GreenWise supermarkets featuring organic produce, meats with no added hormones, and more healthful prepared foods, along with conventional grocery items (see Introduction of New Food Products With Voluntary Health- and Nutrition-Related Claims, 1989-2010).

Local foods

Rising consumer interest in knowing where food is produced has sparked increases in purchases of locally grown food. Supermarkets have responded by emphasizing local offerings such as fresh fruits and vegetables, baked goods, meat, poultry, and dairy products, depending on the location and time of year. Safeway, Kroger, Food Lion, and H-E-B Grocery Company are some of the largest supermarket chains that promote a variety of locally grown or produced foods. Other sources of local food include farm-direct and farmers' markets. While many local foods are promoted as "organic" or "natural," retailers often claim that local foods support local agriculture and are more environmentally friendly.

Food service

In competing for consumers' food dollars, foodservice operators, including restaurants, fast food outlets, and institutional foodservice operators in schools, hotels, and recreational sites, have increased their share of total food expenditures over the years. By 2011, food-away-from-home spending by households and businesses accounted for 48.7 percent of all food spending, up from 47.1 percent in 2000 and 43.0 percent in 1990. Prior to the current recession, the share of household expenditures for prepared foods and meals had risen due to changes in household composition—such as more single-person households and more households with two working adults—as well as increased household incomes and changes in consumer preferences for convenience foods.

In response, some supermarkets have expanded the variety of ready-to-eat entrees and meals in their prepared food departments. Many stores have added a seating area to challenge fast food outlets for business. For example, Wegman's Food Markets, a Rochester, NY-based operator of 81 supermarkets, introduced the Market Café, an instore foodservice option containing a wide range of prepared and made-to-order foods. In the mid-2000s, the annual sales of prepared foods sold in supermarkets grew 4 to 4.5 percent annually, compared with 2 to 2.5 percent for other grocery products.